Quick Facts

Libya could not be ranked in the 2018 Index because of the lack of reliable comparable data on all facets of the economy. Official government compilations of economic data are inadequate, and data reported by many of the international sources upon which Index grading relies remain incomplete.

Political instability, factional clashes, and security threats from domestic and foreign followers of the Islamic State have made economic recovery and development in Libya fragile and uneven. The government faces the daunting challenges of disarming and demobilizing militias, enforcing the rule of law, and reforming the state-dominated economy. Power outages are widespread. Living conditions, including access to clean drinking water, medical services, and safe housing, have declined as more people have been internally displaced by the civil war. These problems are likely to persist until a permanent government is in place.

Background

Muammar Qadhafi seized power in 1969 and ruled as a dictator until he was overthrown in 2011. Since then, the country has been in political upheaval. In June 2014, Libya held its second parliamentary election since Qadhafi’s overthrow; in November, the Supreme Constitutional Court ruled that the elected parliament was constitutionally illegitimate. Pro-Islamist militias allied with the Muslim Brotherhood have established parallel institutions. In 2016, the U.N. brokered the establishment of a national unity government to replace the two rival administrations. Oil and natural gas provide about 80 percent of GDP, 95 percent of export revenues, and nearly all government revenues. Extremists have attacked oilfields and seized oil infrastructure, threatening government control of oil and gas revenues.

Arbitrary seizure of property is common in a climate of general instability. While Libyans have the right to own property and can start businesses, regulations and protections are not upheld in practice. Businesses and homes have been confiscated by militants, particularly in Libya’s eastern regions and in Benghazi. In the absence of a permanent constitution, the role of the judiciary remains unclear. Corruption is pervasive.

The top income tax rate is 10 percent, but other taxes make the top rate much higher in practice. The overall tax burden equals 21.3 percent of total domestic income. Over the past three years, government spending has amounted to 92.9 percent of total output (GDP), and budget deficits have averaged 60.7 percent of GDP. Public debt is equivalent to 7.4 percent of GDP.

The existing regulatory framework continues to be severely undermined by ongoing political instability and turmoil. The labor market remains destabilized, and the large informal sector is an important source of employment. Libya has an extensive system of subsidies, with food and energy subsidies alone consuming about 16 percent of the budget.

Nontariff barriers significantly impede trade for Libya. Ongoing conflict is a deterrent to trade and investment flows. The financial system is hampered by unstable political and economic conditions, and limited access to financing severely impedes any meaningful development of private business.